Question: I don't know how to solve b) and c), please let me know. 4.2 (9P) A chemical company wants to introduce a new product to

4.2 (9P) A chemical company wants to introduce a new product to the market. In case of a success (80% probability) a profit of 4 will be made. Otherwise, there will be a loss of 1 . Before introducing the product to the market, a market survey which costs x>0 can be undertaken. In case the market survey is positive (80% probability) the chance of a market success is 98,75%. If the market survey yields a negative result, the chance of a market success is 5%. The decision tree provides the three alternatives "Market introduction", "Market survey" and "No introduction to market" as well as the payoffs. a) Complete the decision tree. (3P) b) Use the roll back procedure in order to ealculate the expected payoff of the three altematives depending on x. Indicate the optimal strategy in the decision tree for x1. (5P) c) Using the decision tree, calculate the value of the market survey. (IP) 4.2 (9P) A chemical company wants to introduce a new product to the market. In case of a success (80% probability) a profit of 4 will be made. Otherwise, there will be a loss of 1 . Before introducing the product to the market, a market survey which costs x>0 can be undertaken. In case the market survey is positive (80% probability) the chance of a market success is 98,75%. If the market survey yields a negative result, the chance of a market success is 5%. The decision tree provides the three alternatives "Market introduction", "Market survey" and "No introduction to market" as well as the payoffs. a) Complete the decision tree. (3P) b) Use the roll back procedure in order to ealculate the expected payoff of the three altematives depending on x. Indicate the optimal strategy in the decision tree for x1. (5P) c) Using the decision tree, calculate the value of the market survey. (IP)
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